UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA AMERICAN GREAT LAKES PORTS : ASSOCIATION, et al. , : : Plaintiffs, : : Civil Action No.: 16-1019 (RC) v. : : ADMIRAL PAUL F. ZUKUNFT, : Commandant, United States Coast Guard, : et al. , : : Defendants. :
MEMORANDUM OPINION

I. INTRODUCTION In 2016, the Coast Guard promulgated new rules for calculating the rates that international shippers must pay American maritime pilots on the waters of the Great Lakes. Throughout the notice-and-comment process, Plaintiffs—represent atives of the international shipping community—criticized the proposed rules on a variety o f grounds. After having their comments largely rejected, the shi ppers sued the Coast Guard inthis Court under the Administrative Procedure Act, 5 U.S.C. §§ 500 et seq . In this Court’s most recent opinion, the Court ruled that the Coast Guard acted arbitrarily and capricio usly in two ways, but reserved its judgment on the issue of the appr opriate remedy to be applied i n this case. After having now received supplemental briefing, t he Court now decides the issue . For the reasons stated below, the Court finds that the appropr iate remedy is to remand this m atter to the Coast Guard without vacating the 2016 Rule.2 II. BACKGROUND This Court previously gave a deta iled descripti on of the facts at issue in this case in its prior Memorandum Opinion, Am. Great Lakes Ports. Ass’n. v Zukunft, ––F. Supp. 3d––, 2017 WL 5128999 (D.D.C. Nov. 3, 2017). In shor t, this matter concer ns the methodology that the Coast Guard promulgated in 2016 for calculating rates that inte rnational shippers must pay to maritime pilots on the waters of the Great Lakes. Plaintiffs f iled suit in this Court challenging the Coast Guard’s rate-setting method on a variety of grounds under the Administrative Procedure Act (“APA”). The Court closely examined each of thos e arguments and found two to be of merit. The first concerned how the Coast Guard went about estimating o ne of the methodology’s inputs—target pilot compensation. Under the revi sed methodology, the Coast Guard relied on compensation data for certain Canadian pilots a s a benchmark, given the highly analogous nature of the work tha t they performed and the condit ions under which they performed it. However, the Coast Guard fe lt that some amount of adjustme nt was needed in order to reflect the fact that, unlike U.S. pilo ts, Canadian pilots were governm ent employees. The Coast Guard eventually decided to set targe t pilot compensation equal to th e Canadian pilot compensation plus an upward adjustment of te n percent. However, the Coast G uard gave no rational explanation justifyi ng the level of adjus tment and it did not a ppear that the ten-percent figure was based on any rigorous analys is or considered judgment. Rat her, it appeared that the number was merely mentioned at some poi nt during a meeting of the Grea t Lakes Pilotage Advisory Committee. Consequently, the Court found that the Coast Guard’ s decision to adjust the benchmark compensation by ten percen t typified arbitrary and ca pricious decisionmaking and therefore violated the APA. T o be clear though, the Court did not find that the decision to make3 an adjustment was arbitrary a nd capricious, it found only that the number ultimately selected by the Coast Guard was unsupported by any rational decisionmaking. The Plaintiffs’ second meritorious argument concerned the Coast Guard’s failure to consider revenue obtained from so -called “weighting factors.” In setting pilotage rates, the Coast Guard seeks to set hourly pilotage rates that will be suf ficient to cover t he expenses of the pilotage associations and also provide them with a modest rate of return. During the notice-andcomment period, Plaintiffs observed t hat the proposed rule soug ht to set pilotage rates that would achieve “a target revenue fi gure given the expected demand in the upcoming year.” Administrative Record (“A.R .”) at 293, ECF No. 27-2. But, as P laintiffs pointed out, actual pilotage association revenues we re not just a function of pilot age rates and demand (i.e. the amount of shipping traffic in a given season). See A.R. at 293–94. Indeed, they argued that fees based on vessel size, which is m easured using “weighting factor s,” represented a non-trivial portion of the revenue realiz ed by pilotage associations. See A.R. at 294. However, because the Coast Guard’s proposed rate-setting methodology failed to account for these additional revenues, Plaintiffs argued that the rate -setting calculation would neces sarily result in hi gher pilotage rates than necessary to achieve the pilo tage associatio ns’ revenue ta rgets. See A.R. at 294. Thus, commenters urged that the Coas t Guard’s rate-setting methodolog y “must consider the effect of the weighting factor on anticipat ed revenues when setting rates .” A.R. at 295. Despite the pleas from commenters, the Coast Gua rd did not consider the effects o f weighting factors in its methodology. The Court concluded th at the Coast Guard’s failur e to consider the propriety of including weighting factor rev enue in its rate setting methodol ogy was arbitrary and capricious. Although the Court found the Coast Guard’s 2016 Rule was defici ent in the two respects described above, the Court did no t resolve what the appropriate remedy should be in this matter.4 Instead, the Court in structed the parties to provide supplement al briefing a ddressing the appropriate remedy in this case . The parties have now fully br iefed this final issue.

III. ANALYSIS Plaintiffs argue that they are entitled to myriad forms of reli ef. First, Plaintiffs urge the Court to vacate the 2016 Rule i n its entirety. Pls.’ Suppl. Br . at 14–16, ECF No. 36. They then request relief that is both retrospective and pr ospective in na ture. Retrospectively, Plaintiffs argue that they are entitled to r elief that addresses the “burd ensome effects on vessel owners (ratepayers) of the unlawful ra tes established by the 2016 Fina l Rule.” Pls.’ Suppl. Br. at 17. Specifically, they request that th e Court order that the Coast Guard calculate the “overcharges” that Plaintiffs paid in the 2016 season by undertaking a “simpl e arithmetic exercise” and then order the Coast Guard to “re- rate” invoices for the 2016 season , which would effectively entitle ship owners to a refund. Pls.’ Suppl. Br. at 18–20. Alternati vely, Plaintiffs suggest that the Court could require the Coast G uard to credit sh ip owners for t hose same “overcharges” in the next shipping season. Pls.’ Suppl . Br. at 19. Plaintiffs also request that the Court order reimbursements for “overcharges” that have already occurred in the 2017 shipping season, given that the 2017 rate setting relie d on the same ten-percent adjus tment to benchmark compensation as the 2016 season. Pls.’ Suppl. B r. at 22. On the prospectiv e side of things, Plaintiffs ask the Court to (1) enjoin the pilota ge associations from invoicing pi lotage services at t he rates set forth in the 2017 Final Rule, (2) direct the Coast Guard to recalculate the rates in the 2017 Final Rule “by performing the purely arithme tic exercise of removing the 1 0 percent increase in the benchmark pilot compensation and determining the rates that res ult,” and (3) instruct the Coast Guard and the Pilotage Associati ons only to charge for pilotage services based on the recalculated rates for the remainder of the 2017 shipping seaso n. Pls.’ Suppl. Br. at 21–22.5 The Court must note that many of Plaintiffs’ requests demonstr ate that they fundamentally misunderstand this Court’s prior ruling. Indeed, Plaintiffs’ requested relief implies that the Coast Guar d erred by making any upward adjustm ent to benchmark compensation or by not including wei ghting factors into its met hodology. That is not what this Court held. Rather, this Cour t’s prior holding stands only for the proposition that the Coast Guard failed to justify these decisions. For example, on t he ten-percent adjustment is sue, while it is possible that the adjustment amount was set too high, it cou ld also be the case that the adjustment was too low, or it c ould even be true that the adjus tment amount was correctly decided. That issue, however, is not for the Court to decide. See Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co. , 463 U.S. 29, 43 (1983) (“The scope of review under the ‘arbitrary and capricious’ st andard is narrow and a court i s not to substitute its judgment for that of the agency,” rather the court is to determine whether t he agency “examine[d] the relevant data and articulate[d] a satisfa ctory explanation for its actio n including a ‘rational connection between the facts found and the choice made.’” (quoting Burlington Truck Lines v. United
States , 371 U.S. 156, 168, 83 (1962))). Consequently, the remedy for this failure is not, as the Plaintiffs suggest, a “purely ar ithmetic exercise” whereby the error can be corrected by simply removing the ten percent adjustme nt from the Coast Guard’s meth odology and recalculating rates. Instead, the typical rem edy for these types of APA viol ations is to vacate the offending provision and to remand to the age ncy for proceedings consisten t with the court’s order. See Am. Bioscience, Inc. v. Thompson , 269 F.3d 1077, 1084 (D.C. Cir. 2001). Thus, to the extent that Plaintiffs urge the Court to sim ply order the Coast Guard to se t new 2016 and 2017 rates using certain basic arithmetic, that the Court cannot do.6 Under ordinary circumstances, t he APA directs courts to “hold u nlawful and set aside agency action” whenever the action is found to be “arbitrary, c apricious, an abuse of discretion, or otherwise not in accordan ce with law.” 5 U.S.C. § 706(2)(A) . Courts in this Circuit, however, have long held that “[a] n inadequately supported rule [] need not necessarily be vacated.” Allied-Signal, Inc. v. U.S. Nuclear Reg. Comm’n , 988 F.2d 146, 150 (D.C. Cir. 1993) (internal citations omitted). “The decision whether to vacate depends on [1] ‘the seriousness of the order’s deficiencies (and thus the extent of doubt whether the agency chose correctly) and [2] the disruptive consequences of a n interim change that may itsel f be changed.’” Id. at 150–51 (quoting Int’l Union, United Mine Workers of Am . v. Fed. Mine Safety & Health Admin. , 920 F.2d 960, 967 (D.C. Cir. 1990)). The Court examines each of these factors in turn. There is at least some reason t o believe that the errors in the 2016 Rule were substantial. On the ten-percent adjustment issue, the Court simply has no ba sis to know whether the Coast Guard chose correctly or inco rrectly. On the one hand, the Coa st Guard did provide a cogent explanation for why an upward adjustment to the benchmark compe nsation was necessary for purposes of the calculation, but t he Coast Guard did not offer any reason to believe that tenpercent was necessari ly the right figure . And commenters in th e 2016 and 2017 ratemaking cycles provided both arguments and data supporting both higher and lower adjustments. Consequently, this Court is not c onvinced that the Coast Guard would be unable to support its ten-percent figure, but the Court also cannot be sure that the Coast Guard would necessarily come out the same way if it was forced to reexamine the issue. “But the Court’s uncertainty on that point merely highlights th e magnitude of the procedural vi olation.” Shands Jacksonville
Med. Ctr. v Burwell , 139 F. Supp. 3d 240, 268 (D.D.C. 2015) (f inding error in rule making “substantial” where the Secretar y never “provide[d] a reasoned justification of her position”).7 Because the Court has been given no assurance that the Coast Gu ard chose correctly, the Court cannot find that the Coast Guar d met its burden to show that th e flaw in the rule was not serious.
See id. (“To the extent the Secretary bears the burde n of demonstratin g that the ‘normal remedy’ of vacatur does not apply, . . . she has failed to show that th e flaw in the rule was not serious” (quoting Allina Health Servs. v. Sebelius , 746 F.3d 1102, 1110 (D.C. Cir. 2014))). And there is even greater reason to doubt the Coast Guard’s decision on the issue of weighting factors, given that the Coast Guard admittedly saw “potential merit” in the co mmenters’ suggestions and then, just one year later, incorporate d weighting factors into its ra te-setting methodology. Thus, the Court cannot conclude that the de fects in the Coast Guard’s 201 6 Rule were not serious. But the seriousness of the def ects does not end this Court’s in quiry. The Court must also consider the “disruptive conse quences of an interim change that may itself be changed.” “When a court vacates an agency’s rules, the vacatur restores the status quo before the invalid rule took effect and the agency must initia te another rulemaking proceedi ng if it would seek to confront the problem anew.” Envtl. Def. v. Leavitt , 329 F. Supp. 2d 55, 64 (D.D.C. 2004) (internal citation and quotation marks omitted). That is, the offending rule is rendered void and of no effect and there is a “reinstat[em ent] [of] the rules previousl y in force.” Action on Smoking &
Health v. C.A.B. , 713 F.2d 795, 797 (D.C. Cir. 1983). In this case, vacatur would mean that the rates previously decl ared for the 2016 shipping season would be set aside and the 2015 rates, which were lower than those in 2016, would be deemed operative for the entir ety of that shipping season. Shi pping companies and pilotage associations would, after vacatur, find that every payment that was made in the 2016 season was erroneous. Moreover, it would app ear that the Coast Guard woul d be unable to reinstate the 2016 rates through a properly justi fied new rule due to the pre sumption against retroactive8 rulemaking. 1 See Bowen v. Georgetown University Hosp. , 488 U.S. 204, 208–09 (1988) (“[A] statutory grant of legislative rulemaking authority will not, a s a general matter, be understood to encompass the power to promulga te retroactive rules unless that power is conveyed by Congress in express terms” and, “[e]ven whe re some substantial justifica tion for retroactive rulemaking is presented, courts should be reluc tant to find such authority ab sent an express statutory grant.”). While there seems to be some dispute over whether and to what e xtent the pilotage associations might be required to issue ref unds under those circumstances, t o the extent that they would be required to do so, the disruptive consequences are clear. 2 Indeed, the D.C. Circuit has recognized as much in cases that are very much analogous to the circumstances presented here. See Allied–Signal , 988 F.2d at 151 (“the consequences [of vacatur] may be quite disruptive” because “the Commission would need to refund . . . fees collect ed . . . [and] it ev idently would be unable to recover those fees unde r a later-enact ed rule.”); Heartland Reg’l Med. Ctr. v. Sebelius , 566 F.3d 193, 198 (D.C. Cir. 2009) (holding that second Allied–Signal factor weighed against vacatur because vacating the ru le “would have required HHS to m ake payments to those

1 The Coast Guard’s statutory r ate-making author ity is governed by 46 U.S.C. § 9303(f). It provides in relevant part that the Coast Guard “shall prescr ibe by regulation rates and charges for pilotage services, giving cons ideration to the public inter est and the costs of providing the services.” Id. Plaintiffs make no attempt to argue that the language in this statute or any other authorizes the Coast Guard to r etroactively set pilotage rates. The Court’s own review yields no basis upon which to find the Coa st Guard is so authorized.
2 Even if the pilotage associati ons would not be required to iss ue refunds, remand without vacatur is the appropriate remedy when the status quo ante cann ot be restored. See Milk Train, Inc. v. Veneman , 310 F.3d 747, 756 (D.C. Cir. 2002) (holdi ng that remand witho ut vacatur was appropriate when there was “no appa rent way to restore the stat us quo ante” where “the Secretary here has already disbur sed the 1999 program moneys to numerous dairy producers throughout the country, and those m oneys may not be recoverable three years later”); Sugar Cane Growers Co-op of Fla. V. Veneman , 289 F.3d 89, 97 (D.C. Cir. 2002) (holding that remand without vacatur was appropriate because “[t]he egg has been scr ambled and there is no apparent way to restore the status quo ant e” where the Secretary had imp roperly disbursed large quantities of sugar to farmers across th e country, who in turn had already plowed under their crops.)9 hospitals for [certain] years [i n which the rule was in effect] and for any subsequent years until the agency repromulgated the same rule and gave an adequate rea son for rejecting the alternatives,” but “[r]einstati ng the same rule [] likely would not have enabled HHS to recover payments made [in those years] t hrough the time of reinstatemen t” because of the rule against retroactive rulemaking). Becau se “remand with vacatur would, i n effect, dictate a substantive outcome based on a procedural e rror . . . the disruptive conseq uences would be considerable.”
Shands Jacksonville Med. Ctr ., 139 F. Supp. 3d at 270. Having found that the first Allied–Signalfactor favors vacatur and the second factor counsels against vacatur, the C ourt must weigh these competing considerations. “There is no rule requiring either the pr oponent or opponent of vacatur to p revail on both factors,” rather “resolution of the question turns on the Court’s assessment of the overall equities and practicality of the alternatives.” Id. (internal citations omitted). While the Court does find that the deficiencies identified in the 2016 Rule were significant, the Court cannot conclude that they were so substantial as to warra nt the considerable disruption t hat vacatur would likely invite. Rather, the Court finds that the appropriate remedy is to reman d the matter to the Coast Guard and for the Coast Guard to evalu ate and justify an appropriate adjustment to benchmark compensation for its ratem aking methodology going forward. 3

3 In the Court’s prior decision, t he Court also noted that there was a question about whether the weighting-factor i ssue had become moot given that the Coast Guard had issued a rule in 2017 that incorporated wei ghting factors into its rate- setting methodology. See Great Lakes Pilotage Rates—2017 Annual Review , 82 Fed. Reg. 41,466, 41,466 (Aug. 31, 2017). Ordinarily, such action is enough to moot an APA issue. See e.g. , Worth v. Jackson , 451 F.3d 854, 861 (D.C. Cir. 2006). However, in some circumstances, whe n there is a possibility to recoup payments made under a prio r rule, courts have found thatthe promulgation of the new rule may not necessarily eradicate the effects of the old rule and thus may not moot the issue. See Cape Cod Hosp. v. Sebelius , 630 F.3d 203, 210 (D.C. Cir. 2011) (“a live controversy remain[ed] regarding the [pla intiffs’] objection to [a] 2007 ru le” concerning Medicare payments despite agency’s 2008 adjustment “t o reverse the effect of the 2007” rule because “the 2008 rule10 IV. CONCLUSION For the foregoing reasons the Court concludes that this matter should be remanded to the Coast Guard without vacating th e 2016 Rule. An order consisten t with this Memorandum Opinion is separately and contemporaneously issued.

Dated: March 15, 2018 RUDOLPH CONTRERAS United States District Judge

in no way compensated for any underpayments that might have bee n made in 2007.”). There is probably good reason to believe tha t this line of reasoning maybe applicable to the weightingfactors issue. Nevertheless, whe ther the weighti ng-factors iss ue is moot or not, it has no real practical impact on the outcome of this case. At the very leas t, there is a live i ssue with respect to the ten-percent adjustment to benchmark compensation. Indee d, in 2017 the Coast Guard noted that it “continue[d] to beli eve that the benchmark establ ished in the 2016 final rule, based on Canadian pilot salaries plus a 10 percent differential to ca lculate the value of certain benefits, [was] an appropriate level of c ompensation.” 82 Fed. Reg. at 4 1,481. Thus, some remedy is appropriate in this case. Because the Court finds that the app ropriate remedy is to remand without vacating the 2016 Rule, whe ther the weighting-factors i ssue is moot or not makes no practical difference in the outcome here.